Costco
Costco Wholesale Corporation is a publicly traded retail company founded in 1976, known for its membership-based warehouse club model that offers brand-name products at competitive prices. Headquartered in Issaquah, Washington, Costco initially served only business customers but expanded its membership to the general public, providing three tiers of membership with varying benefits. The company operates over 890 locations across 14 international markets, including the U.S., Canada, and several European and Asian countries, serving nearly 129.5 million members.
Costco's origins trace back to Price Club, which pioneered the warehouse retail concept before merging with Costco in 1993. Over the years, Costco has earned a reputation as an excellent employer, offering competitive wages and benefits that lead to high employee satisfaction and low turnover rates. The company has also been recognized for its ethical practices and social impact, ranking highly in various assessments of workplace culture and diversity. With a strong focus on customer loyalty and operational efficiency, Costco has solidified its position as a leading global retailer, continuing to experience growth and adapt to changing market conditions.
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Subject Terms
Costco
Company information
- Date founded: 1976
- Industry: Retail
- Corporate headquarters: Issaquah, Washington
- Type: Public
Overview
Costco Wholesale Corporation is a publicly traded retail company that uses a membership-based warehouse club business model to deliver low prices on brand-name products and merchandise. The company traces its history to 1976 when it began operations as Price Club. It is headquartered in Issaquah, Washington, a suburb of Seattle.
Initially, the Costco model focused exclusively on serving the wholesale purchasing needs of business customers. It later opened membership to the general public, with new customers capable of joining in person at any Costco location, by phone, or online. The company features three membership tiers, which are differentiated between business accounts and individual consumer accounts. Each tier offers varying levels of access and benefits in exchange for an annual membership fee.
As of 2023, Costco operated locations in 14 international markets, including the United States, Canada, Mexico, the United Kingdom, Japan, South Korea, Taiwan, Australia, Spain, France, and Iceland. According to data published on the company’s investor relations portal in November 2023, Costco employs approximately 316,000 people worldwide, including 208,000 in the United States. It includes more than 890 warehouse locations worldwide. These serve a customer membership community that includes nearly 129.5 million cardholders.
History
The company now operating as Costco first appeared in 1976 and is considered the first warehouse club business. That year, Sol Price and his son Robert opened Price Club, a San Diego, California-based warehouse retail club that was initially open only to business members. In its first year of operations, Price Club lost a reported $750,000. The company then shifted its operational strategy, opening membership to household consumers. This change quickly proved successful, and by 1979, Price Club was generating profits and had expanded to include two locations, a workforce of nine hundred people, and two-hundred-thousand-member customers.
In 1982, entrepreneurs Jeff Brotman and Jim Sinegal hatched plans to open a new warehouse club retailer that would use a similar business model. Their venture debuted in 1983 as Costco, which opened its first location in Seattle. By the end of 1984, Costco had expanded to include nine warehouse locations in five states and welcomed a membership base of two-hundred thousand customers. Meanwhile, Price Club had grown into a highly successful enterprise with a major regional presence, eclipsing the $1 billion mark in annual sales.
Price Club and Costco both continued to grow steadily during the 1980s, becoming rival competitors. Forbes magazine named Price Club as the “Best Managed Company” in the United States for 1986, with key data points counting 22 warehouse locations, 3.2 million members, and nearly 7,300 employees. At the same time, Costco had expanded to include 17 warehouses, 1.3 million members, and 3,740 employees. By the end of the decade, both businesses had diversified beyond their initial retail-only models to include grocery items such as fresh produce, fresh meat, and bakery products, as well as on-site services like optician laboratories and one-hour photo development.
In 1993, Price Club and Costco merged to form the present-day Costco Wholesale Corporation, which was known as PriceCostco when the merger was first completed. PriceCostco changed its name to Costco Companies, Inc. in 1997 before adopting its current moniker in 1999. By the turn of the twenty-first century, Costco was generating average sales of $100 million per warehouse location while expanding internationally and continuing to diversify its retail operations and service portfolio. In 2010, Costco placed twenty-fifth on Forbes’ annual Fortune 500 list of the largest U.S. companies and had become the world’s eighth-largest retail business.
During the 2010s, Costco continued to consolidate its position as a leading international retail corporation, breaking the one-hundred million member threshold in 2019 and launching a digital membership card as part of its expanding online sales operations. At the end of fiscal year 2020 Costco reported a 9.3% increase in net sales. Costco continued to see increased gross profits in 2021, 2022, and 2023. In 2024, the company announced that it was raising membership fees for the first time since 2017, which coincided with announcements of slowing inflation in the United States.
Impact
Costco has earned a reputation as an excellent employer, which extends back to its early history as Price Club. The company is noted for its ethical treatment of employees, which includes above-average pay for the retail industry along with highly competitive benefits packages. A 2006 review published in the journal Academy of Management Perspectives compared Costco’s operational philosophy to Sam’s Club, a competitor membership warehouse club retailer operated by Walmart. The study directly compared the respective labor management philosophies of Costco and Sam’s Club, finding that Costco paid its employees an average of 40 percent more than Sam’s Club. This, in turn, resulted in higher levels of employee satisfaction and much lower turnover rates.
Costco has maintained the same approach in the years since the 2006 study, with a 2021 Retail Information Systems review ranking Costco as the best retail company to work for in the United States. Forbes singled out Costco’s COVID-19 response in its 2021 Fortune 500 profile of the corporation, noting that Costco moved early to make facemasks a mandatory safety measure while issuing all employees permanent pay raises. In 2023, Forbes listed Costco as one of the best companies for diversity and the best brands for social impact. The following year, Forbes ranked Costco sixty-first on its list of America's best large employers.
The McCombs School of Business at the University of Texas has described Costco as one of the world’s most ethical major companies, noting that observers have characterized Costco as a “testimony to ethical capitalism.” This reputation largely extends from its positive treatment of employees and high employee satisfaction, which includes not only high pay for the retail industry and generous benefits packages but also extensive in-house training and development programs and an organizational philosophy that avoids laying off workers to the greatest possible extent. These factors are partially responsible for the high level of customer satisfaction and loyalty that Costco enjoys, which also results from the retailer’s strategic approach to warehouse locations and layouts, product pricing, and rewards and loyalty programs.
Bibliography
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